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Implementing Quality Control With Automated and Manual Review Processes

Jan 10, 2012

In today’s consistently evolving mortgage environment, thorough quality control (QC) procedures surrounding valuation management are extremely important for safe and successful lending practices. Any organization that has not taken a long and hard look at their own procedures is certain to face regulatory scrutiny, not to mention future challenges in maintaining a profitable business. Even for those that have recently redefined QC procedures, it is important to periodically re-evaluate and compare them against current industry best practices. Whether funding a loan, making a refinance decision or investing in a loan/pool of loans, the most prudent QC examination requires a combined use of a valuation management platform and a manual review approach. Automated quality control Highly competitive companies in the mortgage industry are utilizing valuation management tools to automatically route base decisions. For example, when an incomplete appraisal lands on the desk of a reviewer for manual processing, significant time is wasted assessing the insufficient report and additional time is lost coordinating with the appraisal provider for resubmission. Time and energy is maximized when an automated system can immediately examine the appraisal before it hits the desk of the reviewer. Valuation management platforms can ensure essential compliance standards, such as conformance with the Uniform Appraisal Dataset (UAD) standards, the Uniform Collateral Data Portal (UCDP) hard stops and essential underwriting standards. These automated platforms offer client-defined criteria that provide the ability to modify rule sets and adjust to changes in internal/external regulations. Additional benefits include the assurance against arbitrary or subjective decisions as well as protection against human error. All valuations thereby achieve a “minimum standard” that is set by the organization before valuations are routed to a reviewer for a manual examination (if necessary). High-performance systems will also provide the automated rule functionality to order and compare side-by-side alternative products such as automated valuation models (AVMs), data and analytic risk products. Thresholds can be set such that these products are only ordered when deemed appropriate and can be linked together under a single loan transaction for easy reference. Additional automation of product completeness, compliance and the data creditability allow organizations already strapped for resources to make prompt decisions. Manual quality control As valuable as automated platforms are, they cannot entirely replace the human element in making qualitative decisions applicable to mortgage transactions. The task of manually reviewing an appraisal report should be done by a trained professional with a keen eye and the ability to quickly perform as many quality reviews as possible. It is important for the reviewer to have available all the necessary supplemental products, scores, maps and comps in a seamless dashboard. A good appraisal scoring system will provide immediate direction to a reviewer to help focus on the questionable areas of an appraisal. Bringing the relevant data together under one platform saves time since the reviewer won’t have to open multiple browsers, visit multiple Web sites or pull out miscellaneous paper folders to get there. In conclusion, quality control in the mortgage industry can be approached from multiple ways, but the need to fully understand the collateral backing of each and every loan cannot be questioned. A valuation management system will go a long way in helping to increase efficiencies and remove the element of human error providing a bit of comfort in today’s anxious mortgage environment. An automated review should be seen as a complement to the traditional manual review by qualified professionals. This two-step approach brings higher efficiency and empowers lenders to make smarter and consistent evaluations of collateral risk. David Rasmussen is senior vice president of operations at Veros Real Estate Solutions. For more information, call (714) 415-6300 or visit
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